Ford shows progress, but losses continue
No. 2 U.S. automaker trims net loss, but its core auto business is still struggling.
NEW YORK (CNNMoney.com) -- Ford Motor lost less money than expected in the first quarter. The troubled automaker said Thursday that it's making progress in its turnaround plans but still faces many uncertainties.
The nation's No. 2 automaker cut its net loss to $282 million, or 15 cents a share in the quarter, from a loss of $1.4 billion, or 76 cents a share, a year ago when it took $2.5 billion in charges, primarily for plant closings and staff cuts.
Excluding special items, Ford lost $171 million, or 9 cents a share. That's worse than the profit of $223 million, or 12 cents, it earned on that basis a year earlier, but it's far better than the 60-cent-a-share loss forecast by analysts surveyed by earnings tracker First Call. It's even far better than the most optimistic estimate of a 35-cent-a-share loss.
Ford Chief Financial Officer Don Leclair said that despite the company doing so much better than Wall Street expectations, the results were fairly close to its internal targets.
"We did have a good quarter, but it was not a great surprise," he said on a call with reporters and analysts. "The results ended up a little better than our internal targets. We think we're on plan for this year."
Ford does not give specific earnings guidance and has said it expects losses from its North American auto operations to continue into 2009.
Ford posted revenue of $43 billion, up from $40.8 billion. Automotive revenue rose to $38.6 billion from just under $37 billion a year earlier rather than posting a decline to $34.5 billion as forecast by analysts.
Strong revenue in Europe and the Premier Auto Group, which includes its upscale brands other than Lincoln, accounted for the gain in the face of a $1 billion drop in auto revenue in its North American brands.
Despite the improvements in revenue and net income and the better than expected results, losses continued to worsen at Ford's core automotive operations. Worldwide, its auto business had a pretax loss of $225 million excluding items, up from $203 million on that basis a year earlier.
Its North American unit caused most of the problem, seeing its pretax loss rise to $614 million from $442 million. A drop in sales, particularly in its more profitable light trucks such as the F-150 pickup, were behind the worse results in its home market, despite better performance on cost.
Auto losses also increased in its Asia Pacific and Africa division, and profits declined at Mazda and in South America. Those problems overcame improved earnings in Europe and in its Premier Auto Group, which had record profits.
Kevin Tynan, the auto analyst for Argus Research, said the results from the auto operations shows that the company is still very troubled. He said he thinks investors were getting too excited over the loss being less than forecast.
"That consensus estimate was all over the map," he said. "OK, the revenue number is a good sign, the cash flow is a good sign. But I would be not more than cautiously optimistic on this report. The cost cutting and improvements don't get easier as you go forward."
Tynan has had a sell recommendation on Ford shares for a number of years.
The company also saw a decline in earnings at in its financial services sector, where pretax profit fell to $294 million from $375 million a year earlier.
"We still have a long way to go to turn around this business," said CEO Alan Mulally during the conference call. "The basics of our business is improving. We do expect to see tough earning comparison for the second and third quarter of this year.
"This has been an encouraging quarter for the company but turning around the business will not be quick," he added later in the call.
The company, which has long been behind General Motors (Charts, Fortune 500) in terms of U.S. sales, could lose its long-held No. 2 status to Japanese competitor Toyota Motor (Charts) this year. Toyota has already passed the DaimlerChrysler (Charts), which had long been No. 3 in U.S. sales.